Dispute resolution in the area of providing payment services and issuing and reverse exchange of the electronic money

Competence of the Financial Arbitrator

Payment service providers

Payment service

Electronic money issuers

Electronic money

What disputes is the Financial Arbitrator competent to decide in the area of payment services?

Examples of heard disputes in the area of payment services

Filing a complaint

 

Competence of the Financial Arbitrator

In accordance with Sec. 1 Par. 1 letter a) and b) of the Act No. 229/2002 Coll., on Financial Arbitrator, as amended, the Financial Arbitrator is competent to decide disputes between a payment service provider and payment service user arisen in connection with providing payment services, and disputes between an electronic money issuer and electronic money holder arisen in connection with issuing and reverse exchange of the electronic money.

Rules applicable to the payment services and issuing and reverse exchange of the electronic money

The area of payment services and electronic money is governed by the Act No. 284/2009 Coll., on Payment System, as amended (hereinafter referred to as “the Payment System Act”), in force as of 1 November 2009, which replaced the Act No. 124/2004 Coll., on Payment System, as amended. The Payment System Act was adopted to transpose the Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market into the Czech law.

The Payment System Act governs both the conditions imposed on providing payment services by public law and the private relationships between the payment service providers and the payment services users. Other legislation usually applies to the same relationships of both private law (e.g. Act No. 89/2012 Coll., Civil Code) and public law nature (e.g. Act No. 634/1992 Coll., on Consumer Protection, as amended, Act No. 101/2000 Coll., on Personal Data Protection, as amended, Act No. 253/2008 Coll., on Certain Measures against Money Laundering and Terrorist Financing, as amended).

The list of applicable legislation is available here.

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Payment service providers

The Payment System Act does not define the term of payment service provider; it only establishes the abbreviation of “provider” and “user” in its Sec. 1 letter c). Sec. 5 of the Payment System Act lists entities authorized to provide payment services based on the licence granted by the Czech National Bank, or by virtue of the single licence:

a) banks,

b) foreign banks and foreign financial institutions,

c) savings and credit associations,

d) electronic money institutions,

e) foreign electronic money institutions,

f) small-scale electronic money issuers,

g) payment institutions,

h) foreign payment institutions,

i) small-scale payment service providers,

j) Czech National Bank.

Please find the list of persons authorized to provide payment services in the Czech Republic on the website of the Czech National Bank.

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Payment service

The Payment Service Act defines the payment service in its Sec. 3 both by determining what a payment service is and by laying down what does not amount to a payment service.

The payment service shall be (a) a service enabling cash to be placed on a payment account, (b) a service enabling cash withdrawal from a payment account, (c) execution of transfer of funds from a payment account, (d) issuing and administration of payment instruments and devices for accepting payments instruments, (e) money remittance, or (f) execution of payment transaction by the electronic communication service provider where the consent of the payer to execute a payment transaction is given by means of electronic communication device.

On the contrary, the payment service shall not be (a) a transport, collection, processing and delivery of banknotes and coins, (b) money exchanges governed by the Foreign Exchange Act, (c) issuing of paper-based cheques, bills of exchange, traveller´s cheques, vouchers or postal money orders governed by the statute on postal services, (d) issuing payment instruments that can be used to acquire goods or services only in the premises used by the issuer, or with a limited group of service providers, or for a limited range of goods or services, or the payment transaction made thereby etc.

To find the complete payment service definition, please see Sec. 3 of the Payment System Act. The list of related legislation is available here.

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Electronic money issuers

Similarly as in the case of the payment service provider, the Payment System Act does not define the term of electronic money issuer; it only establishes the abbreviation of “issuer” in its Sec. 1 letter d). Sec. 6 of the Payment System Act lists entities that are authorized to issue electronic money based on the licence granted by the Czech National Bank, or by virtue of the single licence:

a) banks,

b) foreign banks and foreign financial institutions,

c) savings and credit associations,

d) electronic money institutions,

e) foreign electronic money institutions,

f) small-scale electronic money issuers,

g) Czech National Bank.

Please find the list of persons authorized to issue electronic money in the Czech Republic on the website of the Czech National Bank .

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Electronic money

The Payment Service Act defines the electronic money in its Sec. 4 both by determining what electronic money is and by laying down what does not amount to electronic money.

The electronic money shall be a monetary value that (a) represents a claim towards the one who issued it, (b) is stored electronically, (c) is issued on receipt of funds for the purpose of making payment transactions, and (d) is accepted by other persons than the one who issued it. All the conditions need to be complied with in order to meet the definition of the electronic money, unless the Payment System Act determines otherwise.

On the contrary, the electronic money shall not be a monetary value the use of which is restricted to a limited group of third parties who accept it, or to certain goods or services to be paid for. In addition, the electronic money shall not be a monetary value that can only be used to pay through the electronic communication service provider for the goods or services delivered to and used by means of the electronic communication device.

To find the complete electronic money definition, please see Sec. 4 of the Payment System Act. The list of related legislation is available here.

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What disputes is the Financial Arbitrator competent to decide in the area of payment services?

As specified above, the Financial Arbitrator is competent to decide disputes between a payment service provider and payment service user arisen in connection with providing payment services. That is a relatively general formulation and using the words “in connection with” leaves a lot of room for interpretation in determining which disputes fall under the competence of the Financial Arbitrator and which do not, as they did arise in certain relation to the providing of a payment service but not in close connection with it. The Financial Arbitrator therefore needs to examine his/her competence thoroughly in each specific case as only the decisions issued in his/her competence can cause legal consequences (otherwise they would be null and void). In order to understand the issue please find below a general interpretation.

In the opinion of the Financial Arbitrator the Financial Arbitrator Act does not restrict the competence of the Financial Arbitrator to the disputes that may arise as a direct consequence of the payment service itself. To interpret the competence of the Financial Arbitrator a teleological mode of interpretation shall be used, i.e. the interpretation that takes into account the purpose of both the Financial Arbitrator Act and the Payment System Act.

The purpose of the Financial Arbitrator Act is to create an administrative out-of-court dispute resolution authority competent to decide disputes between selected financial institutions and their clients, particularly consumers, in order to make it easier for the customers, who are usually weaker contractual parties, to claim their rights.

One of the purposes of the Payment System Act is to create a specific regulation in the area of providing common financial services (mainly keeping current accounts), and thereby to create a minimum standard of quality of such services and of customer protection.

Keeping in mind the need of the restrictive interpretation of the scope of competence of the public authorities (as repeatedly emphasized by the courts of law) the above mentioned suggests that the purpose of Sec. 1 Par. 1 letter a) of the Financial Arbitrator Act was not to create an out-of-court dispute resolution body competent merely to decide disputes arisen out of the providing of payment service as such (therefore out of only a part of the legal relationship between the payment service provider and payment service user), but also disputes arisen out of the rights and obligations related to the providing of payment service (therefore the rights and obligations following from the legal relationship of the payment service provider and payment service user on the whole). Any different interpretation would lead to an inappropriate restriction of the competence of the Financial Arbitrator and would not allow it to accomplish its mission as pursued by the legislation.

To sum up the above, there are two conclusions:

a) the Financial Arbitrator is competent to decide disputes arisen as a consequence of providing a payment service although they do not directly concern the payment service as such – the Financial Arbitrator is for example competent to decide whether the payment service provider is entitled to a fee for the payment service provided;

b) the Financial Arbitrator is not competent to decide disputes between payment service users and payment service providers if they have not arisen in connection with providing payment services – for example the Financial Arbitrator is not competent to decide a personality protection dispute where the payment service provider published the personal data of the payment service user on its website by mistake.

There is also a question to what extent is the Financial Arbitrator authorized to examine whether there is a breach of law. In other words, what legislation needs to be taken into account when deciding a dispute. As there is no provision of the Financial Arbitrator Act or any other legislation that would constitute a restriction of the competence of the Financial Arbitrator as to the extent of the examination the Financial Arbitrator is obliged to take all the legislation of the Czech Republic into account when deciding disputes, particularly the statutes and implementing legislation, as well as the rules set up by the agreement of the parties (the contract of the parties). The conclusion is supported by the wording of Sec. 12 Par. 1 of the Financial Arbitrator Act under which “the Arbitrator shall decide disputes based upon his/her best knowledge and belief, impartially, fairly, without undue delays and only on the basis of the facts established in accordance with this Act and other legislation.” The same is suggested by Sec. 1 Par. 1 of the Act No. 500/2004 Coll., Administrative Procedure Code, as amended (which, pursuant to Sec. 24 of the Financial Arbitrator Act, applies to the proceedings before the Financial Arbitrator adequately): “The administrative authority shall proceed in accordance with statutes and other legislation, as well as with the international treaties that form a part of the Czech law”.

In a cross-border dispute, the Financial Arbitrator shall proceed, having regard to Sec. 1 of the Financial Arbitrator Act, pursuant to Sec. 6 of the Act No. 91/2012 Coll., on Private International Law, as amended, and Sec. 84 of the Act No. 99/1963 Coll., Civil Procedure Code, as amended.

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Examples of heard disputes in the area of payment services:

ATM withdrawal made with a stolen credit card

Malfunction of the ATM

Account blocked due to the enforcement of judgement including the double amount of life minimum

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Filing a complaint

It is recommended to use a Complaint Filing Tutorial of a complaint form for filing a complaint.

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